• Nigerians may lose ownership of listed firms over loans for rights
• How weak growth, sluggish NGX performance, forex scare investors
• 10 firms list N906b shares on NGX in 2021 as investors initiate sell-offs
A lot of listed firms on the Nigerian Exchange Limited (NGX) may, in the near future, be controlled by foreign investors due to failure of existing shareholders to subscribe to rights issues offered by their companies as a result of rising poverty, inflation and devalued currency.
Right issues are the options given by a company to the existing shareholders to buy the shares of the company.
Already, stakeholders are worried that Nigerian shareholders, many of whom are already old and without proxies, are losing out in controlling stakes in some of the listed firms as their foreign counterparts and institutional investors are mopping up available rights, extending their controlling interests in the entities.
With many shareholders unable to take their rights, firms are increasing their exposure to foreign debts, especially to address challenges with access to foreign exchange for raw materials.
Indeed, the nation’s capital market has witnessed substantial rights issues in the last two years, as many listed firms explore fund raising options outside debt.
With many firms declaring very little profit and offering insignificant return on investment, shareholders have become weary and wary of renewing their stakes in the companies. This leaves a huge financing gap that foreigners, with foreign currencies easily fill and expand their grip on the firms.
The investors, who expressed worry about the quantum of rights issues floated in the market between 2020 and 2021 totaling over N50 billion, also cited the influence of foreign core investors in some multinational firms, which could alter ownership structures of the quoted companies to the detriment of the local shareholders.
The Guardian learnt that many of the core investors offered dollars denominated loans to these companies and sometimes equity, which will ultimately throw the company into a loss position in the likely effect of devaluation of the Naira.
Devaluation increases the debt burden of foreign-denominated loans when priced in the home currency. More so, these foreign debts become more difficult to service, reducing confidence among the people in their domestic currency.On the other hand, because of the impact of the pandemic and inflation, many shareholders have become financially incapacitated to take up their rights.But the investors argued that dollar denominated loans are heavily exposed to higher pay out, […]
